F
ollowing updates from its office portfolio loan's sponsor, Starwood European Real Estate Finance (SWEF) has evaluated various business scenarios, concluding that uncertainty surrounding these plans, combined with challenging local market conditions, warrants a 50% impairment of the €12.9m loan. The company's board and investment adviser acknowledge ongoing uncertainty regarding potential outcomes for the loan.

    As of August 31, 2024, SWEF's net asset value (NAV) was £203.7m, with NAV per share at 105.02 pence. Adjusting for the impairment, the adjusted NAV is £192.8m and adjusted NAV per share is 99.43 pence. The company is finalizing its third-quarter portfolio update, expected to be published later this month.

    SWEF has returned £210m to shareholders through compulsory redemptions since January 2023, equivalent to 50.8% of its NAV at the time. This aligns with its orderly realisation strategy adopted in January 2023.

    The office portfolio loan was committed on January 2, 2020, for €35.2m secured against a Central Dublin property portfolio. The successful sale of some assets reduced the balance to €25.9m as of September 30, 2024, secured against seven properties. As of August 31, 2024, the loan represented approximately 10.6% of SWEF's NAV.

    In its Q2 2024 portfolio update, SWEF stated that the underlying assets comprise well-located European city centre buildings with good tenancy rates, but require capital expenditure to upgrade to Grade-A quality. The company is working closely with the sponsor and a valuation firm to identify future needs and potential exit values.